This article reviews and assesses the key elements of the fi scal compact, which – as part of the new Treaty on Stability, Coordination and Governance in the Economic and Monetary Union – was signed by most EU Heads of State or Government on 2 March 2012. The United Kingdom and the Czech Republic abstained. The fiscal compact envisages the mandatory introduction of a balanced budget rule and an automatically triggered correction mechanism at the national level as well as a strengthening of the automaticity of the excessive deficit procedure within the Stability and Growth Pact in case a euro area country breaches the deficit criterion. Overall, the fi scal compact is a welcome step, since it addresses some of the remaining shortcomings of the reinforced EU fiscal governance framework which entered into force in December 2011. Nevertheless, national ownership, strict implementation and rigorous enforcement of the fi scal compact will be crucial. Looking ahead, ambitious further steps towards improving the EU fi scal framework will be necessary.